The NAPF has welcomed Government proposals for a more flexible approach to employer debt in multi-employer defined benefit pension schemes.

A previous reform attempt – the ‘General Easement’ introduced shortly before the last General Election – had been widely criticised as impractical and over-complex. The DWP is now proposing a ‘Flexible Apportionment Arrangement’ which appears simpler and more practicable.

Responding to a DWP consultation on reform of Section 75 of the Pensions Act 1995, the NAPF welcomed the Government’s readiness to address this complex area of the law, but identified a number of ways in which the Government could do more to improve flexibility for schemes while still preserving strong protection for members and their benefits.

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The key points of NAPF's response:

• The NAPF welcomes the proposed Flexible Apportionment Arrangement, which appears simpler and more practicable than the General Easement introduced last year.
• The NAPF welcomes the DWP’s emphasis on placing trustees firmly in charge of approving Flexible Apportionment Arrangements, but cautioned that trustees will need good guidance to help them operate the proposed funding test.
• The NAPF also pointed out that the Flexible Apportionment Arrangement is unlikely to remove completely the need to calculate the Section 75 debt. Trustees of schemes with non-associated employers will still want to have a reasonably accurate idea of its size, and they are likely to ask the scheme actuary at least to calculate it on a notional basis.
• The NAPF urged the DWP to go beyond its plan to extend the ‘notice period’ (for the employer to notify the trustees that the employer intends to use the period of grace provision) from one month to two, saying six months would be more likely to deliver the extra flexibility that the Government wants.
• The NAPF welcomes the proposed Flexible Apportionment Arrangement, which appears simpler and more practicable than the General Easement introduced last year.

The DWP is aiming to have new Regulations in place by October.

Tell us what you think

Do you have views on the Employer Debt rules? Join our NAPF LinkedIn discussion group and take part in the debate.

Section 75 timeline

March 2010 – DWP introduces ‘General Easement’ and ‘de minimis’ easement’

June 2011 – DWP consults on Flexible Apportionment Arrangement
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August 2011 – NAPF welcomes Government reform proposals
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